10 steps to take before bankruptcy in 2015

Let’s make 2015 the year of being proactive about debt problems and bankruptcy.

Too often, the decision to file for bankruptcy comes after the garnishment has started or after the bank account has been levied. Knowing you are in financial trouble and that creditors are hovering makes planning to get out of it easier, even if bankruptcy is your ultimate course of action.

1. Don’t be an ostrich and stick your head in the sand.

There is nothing worse than reacting to a financial crisis after it has occurred and having to file for bankruptcy. Know your potential risks now.

2. Review all three credit bureaus’ reports.

You can go to one of the free sites and download all three bureaus’ credit reports for free. Even old accounts could lead to a lawsuit. That means creditors might be preparing a lawsuit against you while you’re reading this.

3. Look through the public record section.

Are creditor judgments showing up in your credit file? This is the best way to find out whether a bank levy may occur or a garnishment may begin.

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4. Check to see if your current employer is listed on your credit report.

Collection agencies and creditors do their best to search for your bank and your employer. They first look at your credit report; your employment information may be on that report.

5. Prospective employers show up under the “credit inquiry” section.

Anyone looking at your credit should appear under the credit inquires section. You may be applying for a job and may need to authorize a credit check. This tells creditors two things: where you live because you are likely looking for work near your home and where you may have just started working. Clients who recently started a job and then get wages garnished soon after are always confused how the creditor found out about the job so quickly.

6. Keep bank accounts low.

Today, creditors can more easily levy bank accounts and no longer have to levy the branch where you opened your account. They must simply provide the corporate office with the judicial order authorizing the bank levy. If the creditor looks at your credit report and sees a credit inquiry, the creditor also will look for small banks and credit unions near that employer’s location. You could have your rent or mortgage money in the account when it is levied, and filing bankruptcy after the levy means you are unlikely to get that money back.

7. Be careful during tax season.

Creditors are very aggressive February through April. They know you are getting a tax refund and usually that refund gets directly deposited into your bank account. The bank levy can happen at any time, even right after the refund hits your bank.

8. Contact the creditor to start a payment plan first.

Avoid the bank levy or the garnishment by contacting the creditor. Hopefully, you can reach a payment plan agreement.

9. Start your bankruptcy attorney payment plan now.

If you can’t afford the creditor’s payment plan, start paying your bankruptcy attorney now. You can make monthly payments now and likely pay off the balance when you get your tax refund.

10. Once you’re finished paying, get your case filed.

Clients constantly hire me, pay me the fee balance and then never send back the paperwork. I am usually just holding on to the file only to be contacted after the levy or garnishment begins. I can stop the garnishment, but sometimes I can’t get the money back from the bank levy. Once you have paid the balance, call your attorney every day until he or she files your case.

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